If you are an importer or exporter, you will agree to the fact that beneath the surface of your dynamic and interconnected network, lies a realm of uncertainties. These can cast a shadow over even the most meticulously planned trade ventures. For example, your business can suffer significant losses if your valuable cargo is damaged during transit.

Marine Cargo Insurance enters here as a sentinel of security that safeguards the valuable cargoes in transit, whether it is by sea, road, rail, or air. In this article, we embark on an odyssey to uncover the layers of this essential coverage. We would navigate the seas of knowledge to reveal the essential inclusions that form the backbone of this Insurance. Whether you are an importer, exporter, or simply curious about the dynamics of global logistics, this article promises to unveil the intricacies of this insurance. It will empower you with insights that can help you navigate the tides of uncertainty and voyage toward safer and more successful trade ventures.

What is Marine Cargo Insurance Policy?

A Marine Cargo Insurance policy covers losses incurred during the transportation of goods. It isn't limited to sea transport; it includes air, land (road and rail), and inland waterways as well. In addition to covering container damage and cargo loss, it also offers liability coverage for personal injury and property damage to third parties. This insurance policy is required by companies that ship valuable or fragile goods regularly.

Types of Marine Cargo Insurance Policy

We can help you choose the right marine insurance policy for your business. Here are the various kinds of marine insurance policies in India.

1. Specific Voyage Policy

The policy covers a specific single transit, from one place to another. It typically includes coverage against various risks that may occur during transit.

2. Open Cover Agreement

This is an agreement (not a policy) in which the insurer will accept responsibility for all shipments for a specified period, usually 12 months, within the cover's terms. It is not necessary for the insured party to arrange separate insurance for each shipment in this case.

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3. Annual Turnover Policy (STOP)

This policy differs from other marine policies that focus on the value of items, as it specifically covers a company's sales turnover. Under this policy, the insured is provided coverage for all necessary transits to generate sales. It includes coverage for imports and customs duties, raw materials and consumables transportation, movement between factories and depots, as well as job worker movement. Additionally, export transit and temporary storage at intermediary locations like ports and C&F facilities are also covered. Hence, an annual turnover policy can meet all the needs of a marine cargo insurance policy.

4. Annual Policy

Marine cargo shipments are covered for 12 months from all potential perils by this policy.

5. ALOP Insurance

An Advanced Loss of Profit policy is a type of business interruption insurance that relates to the financial consequences of a project delay caused by damage to critical equipment during shipment. It is sometimes referred to as Delay in Start-Up or as Project-Cargo Marine/Consequential Loss.

6. E-product Specific Voyage

Any manufactured e-product or device, any component of it, and other interests are protected against various losses and damages, such as fire, collisions, earthquakes, and lightning.

7. Import Marine Insurance:

There are a variety of modes of transit covered under this policy, including air and sea travel. This policy covers any kind of import, anywhere in the world, to any destination in India.

8. Export Marine Insurance:

This policy is designed for exporters and offers protection for any form of export, from any part of India to any part of the world. Air and sea transportation are the main transit methods included in this policy.

9. Inland Marine Insurance: The policy caters to the needs of domestic transportation companies, providing coverage for goods transiting across India, primarily by rail and road.

Who Needs Marine Cargo Insurance?

It is strongly advisable for companies engaged in the transportation of goods to acquire marine cargo insurance. This policy is greatly desired by various entities such as shippers, cargo owners, logistics service providers, operators, freight forwarders, importers, and exporters.

By obtaining this insurance coverage, shipping companies and couriers can safeguard themselves against potential losses resulting from a range of events including natural disasters, conflicts across borders, problems with water or inland transportation methods, issues during air transport, or mishandling of cargo. An indemnity contract covers property losses caused by specified perils within the insurance policy's limits.

How the Premium for Marine Cargo Insurance Policy is Determined?

· The nature of goods being transported.

· Transportation mode – Road, rail, air, sea

· Material and type of packaging

· Geographical trading restrictions

· The type of chosen insurance coverage

· Ownership and contractual terms

Why Should You Buy Marine Cargo Insurance for Your Business?

It is important for companies to protect their bottom line from damage to business shipments. There are several types of marine cargo insurance policies, including coverage for theft, malicious damage, shortages, non-delivery of goods, damage caused during loading and unloading, and cargo mishandling. A wide range of cargo and goods is covered by marine cargo insurance, and you can tailor the coverage to meet your specific business needs.
Marine cargo insurance is essential for a wide range of enterprises involved in international trade. Here's a breakdown of the types of businesses that typically require ocean cargo insurance:
Marine Cargo Insurance: How to File a Claim?

  1. Manufacturers: Companies that produce goods or components, which are then transported overseas for distribution or further manufacturing, often require ocean cargo insurance to protect their shipments during transit.
  2. Retailers: Retail businesses that import goods from overseas suppliers or export products to international markets rely on ocean cargo insurance to safeguard their shipments against loss or damage while in transit.
  3. Wholesalers: Wholesalers who buy and sell goods in bulk, whether domestically or internationally, may need ocean cargo insurance to protect their inventory during shipment.
  4. Importers: Businesses that bring goods into their country from overseas suppliers typically purchase ocean cargo insurance to cover the risks associated with transporting those goods by sea.
  5. Exporters: Companies that sell products to foreign markets depend on ocean cargo insurance to protect their shipments from potential loss or damage while in transit to their destination.
  6. Logistics Providers: Companies offering logistics and transportation services, including freight forwarding and customs brokerage, often arrange ocean cargo insurance on behalf of their clients to ensure comprehensive coverage for their shipments.
  7. Commodity Traders: Traders involved in the buying and selling of commodities across international markets rely on ocean cargo insurance to mitigate the risks associated with transporting goods by sea.
  8. Customhouse Brokers: Professionals who facilitate the import and export of goods through customs often recommend or arrange ocean cargo insurance for their clients to protect against potential shipping-related losses.
  9. Freight Forwarders: Freight forwarding companies specialize in organizing the shipment of goods from one location to another and frequently offer ocean cargo insurance options to their clients as part of their services.
  10. Steamship Lines: Shipping companies that operate vessels for transporting goods by sea may require ocean cargo insurance to protect their cargo and liability interests.
  11. Air Carriers: While primarily associated with air transport, many carriers also offer ocean cargo services and may provide insurance options for goods transported by sea.
  12. NVOCCs (Non-Vessel Operating Common Carriers): NVOCCs are companies that organize shipments of goods without operating their own vessels and often provide ocean cargo insurance options to their clients for added protection during transit.

· As proof of coverage submit a copy of the insurance certificate

· Next, provide the surveyor’s report containing the loss or damage extent.

· Next, give the copy of the bill of lading as a shipping proof contract.

· Next, submit a claim bill, that mentions the incurred loss or damages.

· Present the list of original invoices and details of the shipped items and their values.

· Finally, any correspondence with carriers that illustrates attempts to resolve the issue should be included.

What is included in Marine Cargo Insurance?

A marine insurance policy protects cargo from various risks and perils that may occur during transport. Major accidents covered by marine insurance include:

Collision: This insurance coverage pertains to safeguarding against physical harm or loss of cargo caused by collisions or accidents during transportation. For instance, if the insured goods are damaged or lost due to a collision between the vessel and another one, this policy will cover the ensuing costs. It can also be expanded to encompass incidents occurring during inland transport via trucks, trains, or other means.

Fire Accident: It covers damages to cargo and property on board caused by fires, including firefighting expenses, smoke damage, and water damage caused by extinguishing agents and water.

Sinking: A sinking or capsizing of the carrier may damage the cargo or property on board. Additionally, it covers the costs associated with salvaging and recovering, as well as any damages caused to other vessels or properties because of the sinking.

Natural calamities: In the event of natural disasters like storms, hurricanes, earthquakes, or tsunamis, this coverage protects against damages or losses to the cargo. As well as liability for damages to other carriers or properties, it covers losses to cargo or property on board and costs associated with salvage and recovery efforts.

Reconditioning Cost: Following a covered loss or damage, the reconditioning cost coverage reimburses a carrier's expenses for repairs or restorations to its original state. This may include repairs to machinery, equipment, and replacement of damaged or lost items as well as labor and materials costs for reconditioning, along with related expenses like shipping and storage.
Overturning: It also covers additional expenses related to overturning, such as salvage and recovery efforts.
Explosion: In the event of an explosion or similar event, explosion coverage protects your shipment as well as any cargo or property on board. In addition, it covers the costs of salvage and recovery efforts incurred because of the explosion, and liability for damages to other carriers and property.

Stranding: Shipments are protected from damage when they become stranded on shoals, reefs, or other obstructions, including cargo and property damaged during stranding.

What is Not Included in Marine Cargo Insurance?

Intentional or willful acts by the insured: It excludes losses or damages resulting from intentional or willful acts by the insured or representative, such as intentionally damaging their own cargo.

Volume & Weight Loss, Liquid Leakage, or Normal Wear & Tear: Insured items are not covered for losses or damages resulting from weight loss, volume loss, liquid leaks, or normal wear and tear.

Incorrect Packaging: There is no coverage for loss caused by the insured's negligence or failure to take reasonable precautions when packaging or preparing the insured item for transport.

Inherent Nature: A loss or damage arising from the inherent nature or defects of the insured item is not covered.

Delay in Delivery: It excludes damages or losses due to a delay in the delivery of insured goods if the delay does not cause physical damage or loss to the goods themselves.

Financial Obligations Default: It excludes coverage for losses or damages that result from the failure of a party involved in the transportation or delivery of the insured goods to meet their financial obligations (for example, failure to repay a loan). The exclusion typically applies, for example, when a party (like a freight forwarder) cannot fulfill his contractual obligations regarding the transportation or delivery of the goods due to financial inability.

Damages arising because of strikes, riots, or war: An exclusion for losses or damages caused by riots, strikes, or war applies to cargo damaged or lost during events such as riots, civil commotions, or war. The policy does, however, exclude some of these perils under certain circumstances.

Some Examples of Marine Cargo Insurance–

1st Example

During a voyage from India to Myanmar, a company manufacturing electrical goods worth Rs 5 crore suffered a storm. The severe storm damages the shipment, causing the electrical goods to become inoperative and completely lost. They could have filed a claim with their insurer for compensation for the damages incurred if they had obtained marine cargo insurance before shipping the goods.

2nd Example -

The 35-year-old entrepreneur sells wallets to customers worldwide through an e-commerce store, which uses a third-party courier for shipping. Unfortunately, he did not secure marine insurance, which resulted in lost goods during transit, which led to financial difficulties and customer dissatisfaction. The entrepreneur could have recovered the loss from the misplaced shipments if he had had an appropriate insurance policy in place.

The footnote:

Every shipment that embarks on a maritime journey carries not only goods but also the aspirations and efforts of countless individuals. In this intricate tapestry, the need for protection is undeniable. Marine Cargo Insurance emerges as a beacon of security, ensuring the smooth flow of goods across borders. Its comprehensive coverage encompasses the entire lifecycle of a shipment, from its embarkation to its final destination, offering a safety net against the unpredictable challenges that may arise. From the perils of the sea to the intricacies of customs duties, this coverage navigates through a myriad of complexities, acting as a bridge between traders and the assurance of protected shipments.

As we conclude our journey, let us carry forward the insights gained. Equipped with a deeper understanding of Marine Cargo Insurance, importers, exporters, and stakeholders in global trade can navigate uncharted waters with heightened confidence. May this knowledge empower you to engage in trade with a sense of assurance and preparedness.

Have You Asked Yourself the Following Questions –

1. What are the various types of Marine Cargo Insurance?

Marine Cargo Insurance - Cargo owners are at risk of cargo mishandling at the terminal and on the ship's voyage. As well as being damaged, misplaced, or lost, a shipment could also be damaged or misplaced, resulting in financial losses for the cargo owner. The policy also includes third-party liability coverage, which covers any damages caused by your cargo to the port, ship, railroad track, other cargo, or individuals.

Machinery Insurance - All essential machinery is covered under this marine insurance policy, as well as any operational damages (subject to post-survey approval by the surveyor).

Liability Insurance - If there is a collision, crash, or other persuaded attack, compensation is needed.

Freight Insurance: In the event of an unforeseeable event or accident, freight insurance provides companies with financial security.

2. What do you mean by inland marine insurance?

The term inland marine insurance refers to a policy that covers goods shipped over land, such as by truck, train, or airplane. Inland marine insurance protects goods during transit over land.

3. Can you define what is general average in marine insurance?

A shipowner may sacrifice a portion of the vessel or its cargo to prevent a larger loss or damage to the vessel or other cargo on board, according to the general average principle of maritime law. When this happens, all parties with an interest in the vessel or cargo share the loss or damage proportionally, including the cargo owners and the vessel.

4. What do you mean by insurable interest in marine cargo insurance?

It is a fundamental principle of insurance that the insured must have an interest in the subject matter of the insurance policy, whether it be financial or otherwise. Insurable interest refers to the legal or financial interest that the insured has in the cargo. To purchase marine insurance, the insured must be able to insure the cargo.

5. In Marine Insurance, what do we mean by constructive total loss?

A fundamental principle of insurance is that the insured must have an interest in the policy's subject matter, whether it is financial or otherwise. Marine insurance requires that the insured can insure the cargo, regardless of whether the insured has a legal or financial interest in it.

6. In marine insurance, what is a jettison?

An individual may deliberately throw overboard cargo or other items from a vessel in distress to lighten its load and save the vessel, crew, and remaining cargo. In marine insurance, jettison is important because it can affect the claims settlement process. The insurer may be responsible for paying the owner or consignee for the value of the lost cargo if the jettisoned cargo was insured.

7. Can you define what is a marine survey for insurance?

Marine surveys for insurance may include assessing the cargo's condition, quality, packaging, storage, and overall suitability for transportation. Surveyors examine cargo for signs of damage, improper handling, or packaging, and then verify that the cargo conforms to relevant regulations, standards, and industry requirements.

8. What do you mean by the marine survey for insurance?

Marine surveys for insurance may include assessing the cargo's condition, quality, packaging, storage, and overall suitability for transportation. Surveyors examine cargo for signs of damage, improper handling, or packaging, and then verify that the cargo conforms to relevant regulations, standards, and industry requirements.

9. State the various principles of Marine Insurance?

Principle of Good Faith – Here, an insured is required to provide all the necessary information and not hide anything important and relevant. Along with that, the insurer is also required to disclose all the policy terms and conditions.

Insurable Interest – There should be an interest in the item insured.

Indemnity - Indemnity requires that an insured receive compensation only for loss suffered.

Subrogation- Under subrogation, the insurer tries to recover the claim amount from any third parties responsible for the loss.

Contribution - Using the principle of contribution, insurers contribute in proportion to the amount of coverage they provide.

Loss minimization - The idea behind this principle is that the insured must mitigate their losses and take reasonable measures to prevent further damage.

  1. Which is not a subject matter of marine insurance?

Land-based properties or structures (e.g., buildings, warehouses)

Personal injury or liability claims not related to maritime activities

Vehicles not intended for maritime use

Property damage or losses unrelated to maritime perils

  1. What do we mean by floating policy in marine insurance?

A floating policy in marine insurance refers to a type of insurance policy that provides coverage for multiple shipments of goods over a specified period, typically within a defined geographic area or trade route.

  1. What are the perils of sea in marine insurance?

In marine insurance, the term "perils of the sea" refers to a broad category of risks or hazards that can cause damage or loss to ships, cargo, or other maritime interests while at sea. These perils are typically covered under marine insurance policies and include storms & bad weather, shipwreck, grounding, collision, fire & explosion, piracy, robbery, loss of cargo, stranding, etc.

  1. What is jettison in marine insurance?

In marine insurance, "jettison" refers to the intentional throwing overboard or casting off of cargo or goods from a ship in distress to lighten the vessel and prevent further damage or sinking. Jettison is a common practice used by ship captains and crew members to mitigate risks and protect the safety of the ship, its crew, and its remaining cargo.

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